Wells Notice
Candlefocus EditorDepending on the nature of the potential violation, the Wells Notice can result in administrative, civil and even criminal proceedings, with the scope of the enforcement action being determined after the SEC considers the Wells Response. Those who receive a Wells Notice letter should be aware of the gravity of the situation and take immediate action to best protect their interests.
The SEC enables the recipient of a Wells Notice to submit a response, known as a Wells Submission or a Wells Response, within thirty days of the initial letter. The Wells Submission usually takes the form of a legal brief prepared by legal counsel that defends the recipient and offers a persuasive argument for why legal action should not be taken against them. Should the SEC deem the response to be inadequate, the Wells Notice may be followed by a formal order that requires the recipient to answer to the SEC’s findings.
A Wells Notice is a serious letter and indicates that the recipient is under investigation by the SEC. It is important to respond to a Wells Notice quickly, as further legal action can be taken if the recipient fails to provide a response within the thirty-day period. Those who receive a Wells Notice should seek the advice of an attorney so they can adequately craft and submit a response that can be used as a potential defense should the SEC file a formal complaint.
Depending on the outcome of the SEC’s review of the Wells Response, it is also possible that the SEC can choose to enter into a settlement with the recipient in lieu of taking legal actions. In such a case, the SEC will outline the facts of the violation, the penalty (which may include monetary fines or industry bans) and other relevant details according to the particular circumstances. In either case, a Wells Notice should be taken seriously and prompt the recipient to take necessary legal and compliance action.